Molina looks ahead to calmer waters

FEATURES

Publication Sponsor

Molina Group looks ahead to calmer waters

Last year was one of the most challenging in the company’s 30-year history. But Hugo Molina Botrán believes the outlook is brighter for 2021.

by Maura Maxwell

@maurafruitnet

Central America is no stranger to hurricanes, but when Eta and Iota struck in a space of less than two weeks at the end of last year, they left in their wake a trail of devastation in Guatemala and Honduras unseen in more than 50 years.

The severity of the damage was not down to the intensity of the winds, but rather flooding which left swathes of banana plantations under water for several days, destroying the root system of the plants.

Fortunately for Guatemala’s Molina Group, the world’s biggest independent banana producer, most of its farms emerged unscathed. “The damage was, for the most part, to plantations owned by the three large banana multinationals and a number of small producers, mainly in the Sula Valley in Honduras,” explains Hugo Molina Botrán.

“Our farms were not directly aff ected by wind or storms. The impact on our operation was, above all, logistical, as most of Guatemala’s bananas are exported through the ports on the north coast.”

Damage to roads and bridges meant access to ports was severely restricted in the weeks immediately aft er the storms. Even now, rebuilding is still causing delays and increasing transit times to the ports.

However, Molina points out that these setbacks are negligible compared with the delays caused by the shipping companies and a lack of available containers. “The pandemic has created signifi cant congestion in the unloading of ships in ports such as Los Angeles and Long Beach – and the recent grounding of a containership in the Suez Canal further compounded the disruption,” he says.

While the resulting loss in production in Guatemala and Honduras caused an almost immediate hike in spot prices for Ecuadorean bananas, Molina notes that growers have not felt the fi nancial benefi t as much as during other times of shortage because markets such as China and the Middle East are importing lower volumes.

“At the same time, the reinstatement of movement restrictions in major markets like Europe, are limiting purchasing and consumption opportunities in several countries,” he says.

According to Molina, banana production in northern Guatemala never fully recovered from Hurricane Mitch in 1998. Instead, it moved to the southern coast of the country. Although this change resulted in a substantial increase in the cost of transporting the fruit from farm to port, this has been largely off set by improvements in productivity in newer farms.

He is confi dent that Guatemala’s banana output will return to preEta and Iota production levels

ABOVE—The group’s farms escaped the worst of the damage from Eta and Iota

OPPOSITE TOP—Pandemic control measures have pushed up production costs

OPPOSITE BOTTOM—Molina is confi dent that global demand for bananas will keep on growing

Publication Sponsor FEATURES

thanks to new production areas in the south of the country. “The worst affected independent growers are unlikely to replant their damaged farms. As for the multinationals, they will have to analyse the cost of rehabilitating their farms,” he says. “Either way, I don’t think that the recovery in these farms will be immediate. At the very least we’re not looking at another harvest until the first half of 2022.

“It is very likely that marginal areas will not be replanted, although the multinationals will try to maintain at least some production in these areas.”

Hurricane damage notwithstanding, Molina Group is, like all banana companies, being squeezed by rising production costs and market disruption.

“In our 30 years of operation, I can’t think of another period when the banana industry has faced such latent pressures on all fronts,” Molina says. “Not only are we dealing with the cost increases caused by the pandemic and control measures to prevent fusarium wilt TR4, but in addition we have rising input costs, and higher shipping rates.

At the same time, he points out that the cost of obtaining and maintaining certifications and the impact of many importing countries limiting or restricting the use of chemicals for pest and disease control, are compounding the pressures faced by growers.

“So far we have managed to partially offset the higher costs with increases in productivity and labour efficiencies. But our biggest challenge comes as retail prices keep going down year after year,” he explains.

“It is reaching a point where producers, especially small producers, will not be able to compete. This will affect communities where employment opportunities are already limited.”

Combined with the challenges of dealing with climate change, there has never been a more difficult time to predict the future and consider new capital investments. For now, Molina says the company’s strategy will be limited to seeking economies of scale, better cost control, and agricultural and environmental improvements.

In spite of the ongoing disruption, Molina is optimistic that the market outlook will improve this year as suppliers come to terms with operating within a Covid landscape.

“Last year, record production volumes in many countries coincided with a fall in demand due to the closure and restrictions imposed in many markets,” he says. “At the same time, there was an overlap in the production curves of a number of countries and this caused an imbalance between supply and demand. We hope that in 2021 this problem will not be repeated.”

In the longer term, he thinks per capita consumption will rise post-Covid as people seek out fresh and nutritious food, ensuring that bananas remain one of the world’s most widely consumed fruits. “The economic development of many countries, with the growth of the middle class seeking improvements in nutrition, will increase demand for bananas,” he says. _